03-10455. Self-Regulatory Organizations; Order Approving Proposed Rule Change by the International Securities Exchange, Inc., Relating to a One-Year Pilot for Options Intermarket Linkage Fees

April 23, 2003.

On March 6, 2003, the International Securities Exchange, Inc. (“ISE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),^[1] and Rule 19b-4 thereunder,^[2] a proposed rule change to amend its fee structure to clarify which fees apply to trades pertaining to the options intermarket linkage (“Linkage”) and to specify that such fees are for a one-year pilot.

The Commission published the proposal rule change for comment in the Federal Register on March 19, 2003.^[3] The Commission received no comments on the proposal. This order approves the proposal rule change.

Three ISE fees would apply to Linkage trades other than satisfaction orders: A trade execution fee ($.12, $.14, $.17, or $.21, depending on average daily volume); a $.10 surcharge for options traded pursuant to licensing agreements (but only for executions in options specifically subject to the surcharge); and a $.03 comparison fee. Each of these Linkage-related fees would be implemented as a one-year pilot, expiring on January 30, 2004.

The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange ^[4] and, in particular, the requirements of section 6 of the Act.^[5] The Commission finds that the proposed rule change is consistent with section 6(b)(4) of the Act,^[6] which requires that the rules of an exchange provide equitable allocation of reasonable dues, fees and other charges among its members and other persons using its facilities. The Commission believes the one-year pilot will give the Exchange and the Commission the opportunity to evaluate whether these fees are appropriate.

It is therefore ordered, pursuant to section 19(b)(2) of the Act,^[7] that the proposed rule change is approved on a pilot basis until January 30, 2004.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.^[8]

J. Lynn Taylor,

Assistant Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  17 CFR 240.19b-4.

3.  See Securities Exchange Act Release No. 47484 (March 11, 2003), 68 FR 13354.

4.  In approving this proposed rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

5.  15 U.S.C. 78f.

6.  15 U.S.C. 78f(b)(4).

7.  15 U.S.C. 78s(b)(2).

8.  17 CFR 200.30-3(a)(12).